What can the free trade agreement TTIP accomplish?

fg. In an interview with Die Zeit on 18 February 2015, EU Trade Commissioner Cecilia Malmström admitted that the European Commission had made a mistake with respect to the controversial free trade agreement TTIP (Transatlantic Trade and Investment Partnership) with the United States: “It was a mistake to keep the negotiating mandate a secret for so long”.1 Ms Malmström also hoped – and thus repeated a statement by Barack Obama – to defend “European values” with TTIP because the agreement would negotiate the rules of globalisation with the United States and not with China or Russia. Who had hoped to have substantive, technical corrections, will be disappointed by Ms Malmström’s comments; at best, the communication strategy will change in future.
Recently, numerous critical articles on the trade agreements TTIP, CETA (Comprehensive Economic and Trade Agreement, agreement between the EU and Canada) and TiSA (Trade in Services Agreement) appeared in the media. They all deal with various disadvantages: the fact that TTIP is being negotiated between the European Commission (rather than the individual EU member states) and the United States; the fact that a corporation can file a suit for damage compensation against a state – if the state’s legislation reduced the return on the corporate’s investment – and the fact that these agreements restrict consumer protection. These are all important concerns.
Our approach, however, is different: by using the example of TTIP we intend to find out whether the agreements’ principles affect the countries or international units positively at all – in form of an increase in trade flows, the gross domestic product (GDP), personal income, employment, etc.; only in that case would they make any sense. When we address the legislative history of the agreement, we arrive at the conclusion that already in its beginnings a scientific approach is quite questionable.
The Italian economist Jeronim Capaldo, Senior Research Fellow at the American Tufts University and currently working for the International Labour Organization in Geneva, published a study on this topic in October 2014.2 He noted that the quantitative arguments in favour of TTIP are based on four studies whose projections draw on the same model as the World Bank which was particularly unsuitable for an assessment of trade policy. These projections were based on the assumption that, for example, trade liberalisation automatically and quickly led to full employment. However, this is far from being the case. Therefore, Capaldo built his research on a model of the UN which is not based on the assumption of full employment but on the assumption of aggregated demand, i.e. the demand for all goods in an economy, an approach that reflects the economy better.3
The consequences are dramatic. According to Capaldo’s calculations in 2025 the trade agreement TTIP would have a positive impact in the USA and a negative impact in Europe on their respective economic sectors (trade, GDP, personal income and employment):

  • Increase in net exports in the US by 1.02%, and decrease in the EU (by 0.36% in Italy and 2.07% in North Europe4)
  • GDP growth in the US by 0.36% and GDP sinking in the EU (0.03% in Italy and 0.50% in North Europe)
  • Increase in income up to 699 euros per worker in the United States and decrease in the EU (approximately 165 euros in South Europe5 and 5,518 euros in France)
  • Increase in employment in the US by 784,000 workers and decrease in the EU by 583,000 workers.

Since the trade agreement TTIP does not produce any economic benefit to the EU countries further investigation and negotiation is unnecessary.     •

1    www.zeit.de/wirtschaft/2015-02/cecilia-malmstroem-ttip-fehler
2    http://ase.tufts.edu/gdae The Trans-Atlantic Trade and Investment Partnership: European Disintegration, Unemployment and Instability, October 2014.
3    To simulate the changes in trade flows, GDP, personal income, employment for the year 2025, the data must be calculated without the influence of TTIP (basic assumption) and next with the influence included. Finally, the difference between the two data series is calculated and the result quoted as a percentage of GDP so that it is comparable in the different countries.
4    Finland, the Netherlands and Belgium
5    Greece, Spain, Portugal and East European national economies

New free trade agreements threaten the “Swiss success model” – Stop TiSA!

Signatories: Social democratic members of the National Council Jacqueline Badran (ZH), Marina Carobbio Guscetti (TI), Jean Christophe Schwaab (VD), Carlo Sommaruga (GE) and Cédric Wermuth (AG) as well as Deputy General Secretary François Clément and Fabian Molina, president of the Young Socialists of Switzerland

The “Swiss success model” is based quite emphatically on the quality of our public service, on our (direct) democracy and on an economic policy that redistributes wealth and thus supports demand and, most notably, purchasing power. It is certainly no coincidence that a country like ours, where all the important services for the population are provided by the public sector (education, health, water, energy, public transport, etc.) is still so well off economically. Public service also plays an important role in our national and social solidarity: The necessary services are offered at affordable rates all across the country, while, conversely, the profits of public companies benefit the tax payers.
Yet it is exactly these important benefits that are threatened by new free trade agreements purposing to surrender large parts of the public sector to the “free” market and to withdraw them from democratic control. Although Switzerland does not participate in all of the negotiations (a lot of them only concern the EU, the US and Canada), we could be forced to implement the agreements by means of the “Cassis de Dijon” principle.
In the year 2002, a popular referendum aiming at the liberalisation of the electricity market failed. In the ten-odd years since then, public service suffered very little attack. Some performance deterioration was indeed enforced politically, but it was possible to reject the main liberalisation and privatisation projects with clear majorities. Both the population and the political elite had in fact now noticed that the implementation of neoliberal recipes entails disastrous consequences. The result is always the same: profits are privatised, losses are paid by the public. In the end, as soon as there are problems, the public authorities and the public purse must always be called in to help. But at least since 2010 the wind has been changing again. On the one hand, memories of the failures of privatisation projects in other countries seem to be fading away (for example that of the failed British rail privatisation). On the other hand, the more recent attempts have only been taken in hand a short while ago – politics has not yet taken notice of the drastic negative consequences (for example, privatisation in heavily indebted countries enforced by the EU-”Troika”). In addition, a real tsunami of liberalisations and of the corresponding chaos will be sweeping towards us if the free trade agreements CETA (EU-Canada), TTIP/TAFTA (EU-US) and TISA should ever come into force. Although Switzerland only participates directly in the TiSA negotiations (which are held in camera in Geneva), it could still be forced to join even further agreements in the future. Federal Councillor Schneider-Ammann only recently announced his intention of joining the TTIP Agreement.
The intention of these free trade agreements is mainly to dismantle so-called “import barriers”. Even government-issued rules and regulations are counted among these “barriers”, for example, rules relating to health or environmental protection (e.g. the GM ban or land-use planning regulations), to labour legislation (e.g. generally binding collective labour agreements), to social security (e.g. compulsory health insurance), to the protection of domestic production (e.g. indications of source) or to public service (e.g. the public monopoly concerning elementary schools or the water supply). If these agreements become effective, no company can be barred from offering its goods or services for sale as well any longer neither selling them in another contractual state on an equal footing with its own domestic companies.
If, for example, a US company legally places genetically modified seeds on the market in the United States, according to TTIP rules the EU must also allow this. And by dint of the “Cassis de Dijon” principle, it would automatically also be permitted in Switzerland. Should we nevertheless want to enforce the GM ban enacted by the Swiss people, the foreign investors would have the right to sue Switzerland for “damages” into the millions if they believed that they had suffered losses. The decision would lie with a centre for the settlement of investment disputes meeting in camera – a court or any other authority of appeal is not provided for.
This may seem like a bad sci-fi movie, but is unfortunately already a reality. The State Uruguay was sued for damages amounting to several millions of dollars by a tobacco multi before such an international centre for the settlement of investment disputes. The company takes the view the new law on protection from passive smoking constitutes such an import barrier – and claims “hedge clause procedure” of the kind provided by TTIP, TISA and CETA. It is now quite immaterial that the law serves to protect the public health.
The agreements also provide for a rule that goods or services which are not subject to any regulation at the time of entry into force of the contracts may never afterwards be regulated. This also applies to all products and services that will be invented at some time in the future. Thus, for example, nuclear power could never have been regulated, if such an agreement had been signed before its invention – not even to protect the people. Following the same logic, it would no longer be possible for the public sector to re-assume control of areas or tasks which had once been liberalised or de-regulated – not even if the people were to pronounce for doing exactly the like in a public referendum or if a liberalisation attempt should fail.
Therefore, irrespective of their actual contents, these free trade agreements are unacceptable even merely from a democratic perspective. Should our parliament and our people agree to such agreements, we would limit our democratic rights massively: We would never again be able to exercise democratic control over domains once liberalised or not yet regulated. Such “eternal bondage” for democracy is incompatible with the principles of our constitutional state. Thus, these agreements challenge our Swiss democratic sovereignty and are a serious threat to the public service. They endanger long-fought-for and long defended social achievements such as health and worker protection and the preservation of the environment. We will therefore strive against them passionately.